The past decade has witnessed a fundamental shift in business dynamics, and with it a big change in the pattern of risk. Advances in information and communications technology (ICT) have produced an exponential growth in performance, for example, making vastly more possible within an ever-diminishing time frame. I call this the Innovation Big Bang and its implications for business are simply seismic. Firms that rise to the challenge will thrive; those that ignore it, or fail to grasp its implications, risk marginalisation and eventual extinction.
The primary demand of the Big Bang is for businesses to produce more ideas, with more customer appeal, more quickly. Sounds simple, but how can businesses transform their innovation processes to make this happen? Traditional approaches to innovation, based on in-house research and development departments, are no longer ‘fit for purpose'. They're too slow, too inward looking, and, no matter how big the business, they struggle to produce enough ideas.
To overcome the constraints of in-house innovation, firms are increasingly turning the whole approach on its head by adopting the concept of open innovation. This will typically involve working with people outside traditional R&D teams, people from other companies, academics, customers and the public at large. Maybe you're thinking this doesn't sound like anything especially new. Where open innovation breaks fundamentally with the past is in its use of the internet.
By moving the innovation process online, open innovation massively increases the number of potential participants, going beyond business partners and universities, to include people businesses probably don't know and certainly have never met.
Our ecosystem for harnessing innovation has to be outside of BT. We have customers right at the front end of our research process. This can be uncomfortable but is essential. They see your dirty laundry, they see the things that do not work, and they may even see you fail on the development cycle, but you get the richness of their input very early on.
The key to the success of open innovation lies in the way it adds real value for all parties concerned. For BT, it creates the perfect complement to its own advanced R&D business. For the BT partner the model lowers risk and marketing costs, increases sales efficiency, and accelerates growth, by providing access to a pool of BT customers most likely to be interested in taking a service. And for BT's customers, it offers a continuous conveyor belt of innovative and proven applications.
Innovation rarely happens in a vacuum, of course. It is a social activity—even within corporate R&D departments, people like to “bounce ideas off one another,” get together to “kick the tyres” of their ideas, and so on.
Such interactions are routine when people are located together. But as firms use open innovation to involve more and more people in their innovation process, the likelihood that the people who need to exchange their ideas, work on designs, and so on will be located in the same premises is reducing fast. Chances are they will be on different sides of the world.
Let me describe one service in detail to demonstrate how open innovation comes together. BT Tradespace is a successful example of where we have been able to take a whole series of BT capabilities, and mash them up with third party Web 2.0 applications. Some of these applications traditionally would not have been backed by us directly because they were below the hurdle rate of investment in our organisation.
We have since seen tens of thousands of small and medium sized enterprises gain access to markets in ways that they have never had while many gain the credibility of BT hosting the environment.
BT now has collaborations with more than 30 universities around the world where we are extending the research of BT, working with partners. Where in the past BT would have invented everything from the silicon germanium structure through to the consumer electronics device, we now have a set of collaborations to replace that.
We are working actively with start ups. We have brought over 20 emerging technologies and services into BT in the last 24 months in meaningful, key ways that would never have happened – dancing with the 800lb gorilla and getting crushed was something that would have happened in the past.
Globally, we have people scanning all around the world who are turning over rocks, dealing with venture capitalists where investment is taking place and they come back and scope and de scope what we are doing within the purpose driven innovation inside our organisation.
With open innovation you must have governance and process, but at the end of the day it's people that make partnerships work – not contracts. We've also learnt that if you try to impose too many operational demands you destroy innovation. The secret is to play to each other's strengths and that's what BT aims to do.
For example, BT and long-term partner, Infosys, both believe that in an age of digital ecosystems, it is imperative that technology companies form research and innovation collaboration networks and work jointly to bring innovations to market faster.
In January we signed a memorandum of understanding (MoU) with Infosys to put in place a framework under which the companies will collaborate on research and innovation projects. Both companies have invested in research and development in software engineering and technology space but we wanted to go further and engage in strategic research and innovation-driven collaboration.
As a first collaborative activity under the framework set in the above MoU, BT and Infosys have just signed a Research and Development collaboration contract to integrate Infosys's GRADIENT with BT's Real Time Business Intelligence (RTBI).
RTBI is a novel platform that employs artificial intelligence technology to automate the collection and analysis of enterprise data in real time to enable rapid adaptation of operational processes.
Infosys's GRid based Access of Distributed Information in the ENTerprise (GRADIENT) system combines two powerful technologies - Enterprise Information Integration (EII) and Grid - to achieve scalable data virtualization.
Integrating the two systems will empower RTBI users with the ability to build their own Business Intelligence dashboards through a few mouse clicks using real-time fused data from any number of distributed data sources. It will also render the RTBI platform highly scalable due to the Grid based architecture of GRADIENT.
It is a great example of seeking innovation beyond the boundaries of the payroll for both organisations.
In summary, for those of you looking to renew your innovation process, understand that none of this is especially easy. Open innovation requires business managers who can transcend the constraints and culture of their own organisations and harness contributions from people across a broad spectrum of disparate backgrounds.
And if that wasn't enough, post-Enron concerns with corporate governance are fostering a business environment where organisations are increasingly reluctant to ‘grasp the innovation nettle'. Speaking in May 2007 about Section 404 of the Sarbanes-Oxley Act, Cynthia Glassman, Under Secretary for Economic Affairs at the US Department of Commerce, observed that “businesses were becoming reluctant to take risks on innovations that may, or may not, secure their futures”.
The key phrase here is “secure their futures”. There's no permanency in business, no matter how big the organisation. Of the companies included in the Fortune 100 when it was first published in 1917, only 18 still appear and 61 have simply ceased to exist. A business's success, indeed its very survival, is dependent on being willing to take risks on innovation. But innovation is not an end in itself – you need to deliver the innovations your customers want, when and where they want them to innovate at the speed of their lives and not at the speed of technology.